Thursday, February 04, 2010

Zero Gravity Ohio

The high tax bogeyman is back in the Ohio news. The crux of the argument is the same narrative I see recycled across the United States. The misinformation:

In his recent State of the State address, Gov. Ted Strickland announced his plan to spur job growth through a $40 million Energy Gateway Fund focused on developing "green energy" jobs. What both the governor and the state legislature fail to recognize is that the state's tax climate is driving businesses and individuals out of Ohio.

Unequivocally, the author is describing the tax regime as a push factor. If only Ohio were more like Michigan. That's an actual suggestion after detailing the out-migration woes. The opinion piece isn't all bad. I appreciate the regional focus. No sense in repeating the Wendell Cox nonsense about the exodus from overtaxed Rust Belt. However, I suspect parochial competitiveness is the real reason.

We're as eager as anyone for this recession to be over as anyone is. But in the meantime we're fighting it by out competing other states and welcoming jobs from companies that decide that Indiana gives them a lot better chance to get their money back than Michigan, Ohio, Pennsylvania, or wherever else they are.

Regional cooperation might be at a nadir as the economy begins to recover. Richard Longworth wrote two posts (here and here) about this problem. Protectionist rhetoric is on the rise. I digress. The Tax Foundation is exploiting mega-regional disharmony to push Ohio towards tax reform.

Focus on talent attraction. Taxes aren't the issue. (Via Aaron Renn's Twitter feed) West Michigan has figured that out:

Ann Harten, vice president of human resources and global information systems at Haworth Inc. and facilitator at the Tuesday meeting held at the Haworth headquarters, says that when it comes to recruiting talent, local businesses first compete against the draws of other regions -- not necessarily other companies.

Hot-shot executives who are considering career moves compare metropolitan areas, so they analyze how West Michigan stacks up against such regions as Nashville, Austin and Milwaukee in making their decisions, she says.

When they shared notes with each other, chief information officers and human resources executives at some of West Michigan's largest global companies discovered they were having the same problem with recruiting top-level talent, simply because there was a fuzzy perception of the area. ...

... "A lot of people thought there was nothing in the state except for automotive manufacturing," Stotts says. "There was the perception that the economy was terrible. Anything west of Lansing was thought to be agricultural."

Communities such as Holland, Grand Haven, Muskegon or Grand Rapids were thought to be suburbs of Detroit. "People didn't have any knowledge of any communities in the area. There was a total lack of awareness as a whole. Everybody was facing the same challenges."

The above story tends to get lost in anxiety about brain drain and opens the door for the Tax Foundation to pursue its agenda with a dubious recitation of the facts. If only it were so easy as to simply reduce tax rates. It isn't. But that option is cheaper than place-based strategies that are fundamentally designed to reduce out-migration. The sunk costs represent a redoubtable risk.

Enter Glen Norton, a developer who became the senior business development consultant of Hamilton's downtown renewal division.

Norton and three investors, using only private money, bought the three-storey building that started life in 1887 to house soldiers from the armoury across the street.

"The idea is that creative professionals need a small space and benefit from working in close proximity to each other," Norton said.

"There's that synergy, that sharing of ideas, that energizing each other, that opportunity to do projects together."

Norton and his partners have set out to show one can take an old building in downtown Hamilton, fix it up and repurpose it and it works as a business model.

"We worked backwards to what a traditional developer might have done. We said, 'Let's find an old building and then let's figure out what we can use it for.'"

The ground floor, which includes a magnificent terrazzo floor and 11-foot ceilings, will house a boutique cafe and a gallery. ...

... The second and third floors will contain 20 studios. Half of them have already been snapped up, even though the owners have not spent a cent on advertising. One web designer wants four.

"It's been pure word-of-mouth," Norton said.

That's how shrinking cities will get back on the map. There has to be a buzz from a trusted source. Relocation is risky business, which is why most people don't move very far from their place of current residence. Or, they follow friends/family to a boomtown or struggle to make it in a first class global city. Understanding the rationale behind this migration is critical to economic redevelopment.

Along those lines, I rather like Mike Madison's recommendation to Pittsburgh:

The business community and local government should stop preaching to the local business choir ("Isn't Downtown Such a Wonderful Place?") and make meaningful and public efforts to bring people to the region from outside Pittsburgh. Move here, please! Re-invest in Pittsburgh's sister cities program (here's the list, including what I believe is the newest: Danang). Promote a "sister city of the month" campaign in the region that features business, arts, culture, and citizens of our urban buddies. Study how other post-industrial cities have attracted immigrants in the last 40 years. Bring more fresh eyes and fresh voices to Pittsburgh -- the New Girl herself being Exhibit A of that sort of thing.

The boldfaced sentence is the part I most appreciate. Any "meaningful" effort starts there. That goes for tax reform advocates, as well. Show your readers a working example, "Lower taxes in Michigan plug brain drain!" Good luck with that. As for attracting immigrants, the authors of "Hollowing Out the Middle" claim Iowa's campaign worked. There is a be-careful-what-you-wish-for asterisk in terms of community integration, but the numbers are promising.

With a few exceptions, Rust Belt cities struggle to attract talent. That difficultly takes a back seat to talent retention. I applaud West Michigan's fresh thinking and open inquiry. Ohio could learn a few things from its neighbor to the north. And I'm not talking about tax reform.

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